THE WOODLANDS, Texas,
Nov. 7, 2018 /PRNewswire/ -- CSI
Compressco LP ("CSI Compressco") (NASDAQ: CCLP) today announced
third quarter 2018 consolidated financial results and provided
fourth quarter guidance.
Consolidated revenues for the quarter ended September 30, 2018 were $115.3 million compared to $99.9 million for the second quarter of 2018 and
$71.6 million for the third quarter
of 2017. Compared to the second quarter of 2018, total
revenues increased 15.3%, driven primarily by new equipment sales
and stronger aftermarket services activity. Net loss for the
quarter ended September 30, 2018 was
$7.9 million compared to a net loss
of $9.6 million in the second quarter
of 2018 and a net loss of $7.8
million in the third quarter of 2017.
Selected key operational and financial metrics for the third
quarter and guidance on certain fourth quarter performance metrics
are as follows:
- Third quarter Adjusted EBITDA(1) increased to
$26.5 million from $23.3 million in the second quarter of 2018.
- Fourth quarter net loss is expected to improve to between
$4.5 million and $3.5 million while Adjusted EBITDA(1)
is expected to increase to between $29
million and $31 million
reflecting the recent equipment additions, cumulative impact of
price increases, continued improvements in utilization and new
equipment shipments from new orders received early in 2018.
- Compression services gross margins in the third quarter
improved 100 basis points (bps) to 47.2% from 46.2% in the second
quarter of 2018.
- Distributable cash flow improved(1) 72% from the
second quarter of 2018 to $8.96
million, resulting in a coverage ratio of 1.07X.
- Overall service fleet utilization increased 130 bps compared to
the end of the second quarter of 2018, to 86.3%. Utilization for
large horsepower equipment, greater than 1,000 horsepower per unit,
increased 250 bps from the end of the second quarter to 96.6%.
- Backlog for new equipment sales was $140
million as of September 30,
2018, up from $102 million at
the end of June 2018.
- New orders received in the third quarter were $71 million. Year-to-date orders received are
$169 million.
(1) Non-GAAP
financial measures reconciled to the nearest GAAP number on
Schedules B,C and D
|
As of September 30, 2018,
aggregate compression services fleet horsepower totaled 1,116,600
and the overall fleet utilization rate was 86.3%. Utilization
of our highest horsepower category, equipment of greater than 1,000
horsepower per unit, was 96.6% at the end of the quarter. We
define the fleet utilization rate as the aggregate compressor
package horsepower in service divided by the aggregate compressor
package fleet horsepower as of a given date. We do not
exclude idle horsepower under repair or horsepower that is
otherwise impaired from our calculation of utilization
rates.
Unaudited results of operations for the quarter ended
September 30, 2018 compared to the
prior quarter and the corresponding prior year quarter are
presented in the accompanying financial tables.
|
Three Months
Ended
|
|
|
|
|
|
September 30,
2018
|
|
June 30,
2018
|
|
September 30,
2017
|
|
Q3-18 vs.
Q2-18
|
|
Q3-18 vs.
Q3-17
|
|
(In Thousands, Except
Ratios, and Percentages)
|
Net loss
|
$
(7,947)
|
|
$
(9,592)
|
|
$
(7,821)
|
|
17%
|
|
(2)%
|
Adjusted
EBITDA(1)
|
$
26,539
|
|
$
23,262
|
|
$
23,341
|
|
14%
|
|
14%
|
Distributable cash
flow(1)
|
$
8,959
|
|
$
5,216
|
|
$
10,905
|
|
72%
|
|
(18)%
|
Quarterly cash
distribution per unit
|
$
0.1875
|
|
$
0.1875
|
|
$
0.1875
|
|
—
|
|
—
|
Distribution coverage
ratio(1)
|
1.07x
|
|
0.65x
|
|
1.58x
|
|
—
|
|
—
|
Fleet growth capital
expenditures
|
$
26,219
|
|
$
25,753
|
|
$
—
|
|
2%
|
|
—
|
Net cash
provided/(used) by operating activities
|
$
10,789
|
|
$
(3,908)
|
|
$
13,218
|
|
--
|
|
(18)%
|
|
|
|
|
|
|
|
|
|
|
(1) Non-GAAP
financial measures reconciled to the nearest GAAP number on
Schedules B,C and D.
|
|
Owen Serjeant, President of CSI Compressco, commented, "We are
pleased with the sequential improvement in our results, which is
consistent with our internal expectations. The compression
market continues to be robust and all signs from increased
inquiries and demand across all of our business are indicating
rapid growth and improved economics as we look to close out 2018
and head into 2019.
"We have seen no slowdown in any of our businesses in the
Compression Market in the third quarter nor are we forecasting any
slowdown moving into 2019. Since we are part of the solution
for Permian takeaway constraints, we continue to see strong demand
for our compression services and new unit sales to address the
issue impacting demand for well site completion services.
"For full year 2018, we expect to deploy into our existing
customer base approximately 100,000 horsepower of our service
fleet. New unit orders were $71
million in the third quarter while year-to-date orders
through September were $169
million. Most of these are scheduled to be delivered
into the Permian basin to midstream companies that are investing to
address takeaway constraints. Permian Basin takeaway
constraints continue to offer opportunities to us as the largest
vertically integrated compression supplier. We are in an
enviable position to be able to offer both compression services and
new unit solutions to customers. In addition we are able to
offer parts and services through our aftermarket network to support
customers through the life of the equipment.
"Compression Services revenue was $58.9
million in the third quarter. Compression services
gross margins of 47.2% improved 100 bps from the second quarter due
to better pricing, additional large horsepower deployed at higher
rates, and the benefits of the recently deployed ERP system.
Most of the new units are being deployed to our current customer
installed base, being incremental horsepower in existing clusters
of equipment that we can service without additional resources
needing to be added to our organization.
"Pricing opportunities are still available to us as compression
supply constraints remain in effect. This is an area that we
continue to monitor and negotiate as contracts roll over and when
new equipment is deployed under new contracts.
"Our new unit sales activities, which complement our compression
services business, had a strong quarter with increased sales and a
great order book. We had an extremely strong booking quarter,
ending the third quarter with a backlog of $140 million, up $38
million from the end of second quarter of 2018 after
recording $36.5 million of equipment
sales revenue in the third quarter. Our ability to fabricate
this equipment in our facility in Midland, Texas continues to be a competitive
advantage from a cost, quality and timing perspective.
Activity in this business continues to remain strong with
outstanding quotations growing with our key customers.
"Aftermarket Services business activity continues to improve and
deliver strong growth year over year. Our aftermarket services
revenue increased 109% over the third quarter of 2017 and 32%
sequentially. Our customers are catching up on previously
deferred maintenance and engaging us to maintain and support their
equipment as they reactivate older equipment and add new equipment
to their existing fleet. We believe this business will
continue to grow as more idle equipment is brought back into
operation and maintenance services return to pre-downturn
levels."
Forward-Looking Guidance
We expect fourth quarter Adjusted EBITDA to be between
$29 million and $31 million, up from $26.5
million recorded in the third quarter. Additionally we
expect fourth quarter revenue of between $125 million to $135
million, inclusive of between $45
million and $50 million of new
equipment sales. We further expect that our distribution
coverage ratio will be between 1.5X and 1.6X in the fourth quarter
with distributable cash flow increasing from $9.0 million to between $12.9 million and $14.0
million. Reconciliations of expected Adjusted EBITDA
and distribution coverage ratio to the nearest GAAP financial
measures are included on Schedule D.
We expect 2018 total capital expenditures to be between
$110 million and $120 million, inclusive of $18 million to $20
million for maintenance capital expenditures. We expect to
fund these capital expenditures from the bond offering completed in
the first half of the year and from cash flow from
operations.
Conference Call
CSI Compressco will host a conference call to discuss third
quarter 2018 results today, November 7,
2018, at 10:30 a.m. Eastern Time. The phone
number for the call is 1-866-374-8397. The conference will
also be available by live audio webcast and may be accessed through
CSI Compressco's website at www.csicompressco.com. A replay
of the conference call will be available at 1-877-344-7529,
conference number 10115970, for one week following the conference
call and the archived webcast call will be available through the
Company's website for 30 days following the conference call.
Third Quarter 2018 Cash Distribution on Common Units
On October 22, 2018, CSI
Compressco announced that the board of directors of its general
partner declared a cash distribution attributable to the third
quarter of 2018 of $0.1875 per
outstanding common unit, which will be paid on November 14, 2018, to common unitholders of
record as of the close of business on November 1, 2018. The distribution coverage
ratio (which is a non-GAAP Financial Measure defined and reconciled
to the closest GAAP financial measure on Schedule B below) for the
third quarter of 2018 was 1.07X.
CSI Compressco Overview
CSI Compressco is a provider of compression services and
equipment for natural gas and oil production, gathering,
transportation, processing, and storage. CSI Compressco's
compression and related services business includes a fleet of more
than 5,700 compressor packages providing approximately 1.1 million
in aggregate horsepower, utilizing a full spectrum of low, medium
and high horsepower engines. CSI Compressco also provides
well monitoring and automated sand separation services in
conjunction with compression services in Mexico. CSI Compressco's equipment sales
business includes the fabrication and sale of standard compressor
packages, custom-designed compressor packages, and oilfield fluid
pump systems designed and fabricated primarily at our facility in
Midland, Texas. CSI
Compressco's aftermarket business provides compressor package
reconfiguration and maintenance services, as well as the sale of
compressor package parts and components manufactured by third-party
suppliers. CSI Compressco's customers comprise a broad base of
natural gas and oil exploration and production, mid-stream,
transmission, and storage companies operating throughout many of
the onshore producing regions of the
United States, as well as in a number of foreign countries,
including Mexico, Canada and Argentina. CSI Compressco is managed by
CSI Compressco GP Inc., which is an indirect, wholly owned
subsidiary of TETRA Technologies, Inc. (NYSE: TTI).
Forward-Looking Statements
This news release contains "forward-looking statements" and
information based on our beliefs and those of our general partner,
CSI Compressco GP Inc. Forward-looking statements in this news
release are identifiable by the use of the following words and
other similar words: "anticipates," "assumes," "believes,"
"budgets," "could," "estimates," "expects," "forecasts," "goal,"
"intends," "may," "might," "plans," "predicts," "projects,"
"schedules," "seeks," "should," "targets," "will," and
"would." These forward-looking statements include statements,
other than statements of historical fact, concerning the recovery
of the oil and gas industry and CSI Compressco's strategy, future
operations, financial position, estimated revenues, negotiations
with our bank lenders, projected costs, and other statements
regarding CSI Compressco's beliefs, expectations, plans, prospects
and other future events and performance. Such forward-looking
statements reflect our current views with respect to future events
and financial performance, and are based on assumptions that we
believe to be reasonable, but such forward-looking statements are
subject to numerous risks and uncertainties, including but not
limited to: economic and operating conditions that are outside of
our control, including the supply, demand and prices of crude oil
and natural gas; the levels of competition we encounter; the
activity levels of our customers; the availability of adequate
sources of capital to us; our ability to comply with contractual
obligations, including those under our financing arrangements; our
operational performance; the loss of our management; risks related
to acquisitions and our growth strategy; the availability of raw
materials and labor at reasonable prices; risks related to our
foreign operations; the effect and results of litigation,
regulatory matters, settlements, audits, assessments, and
contingencies; or potential material weaknesses in the future;
information technology risks, including the risk of cyberattack;
and other risks and uncertainties contained in our Annual Report on
Form 10-K and our other filings with the U.S. Securities and
Exchange Commission ("SEC"), which are available free of charge on
the SEC website at www.sec.gov. The risks and uncertainties
referred to above are generally beyond our ability to control and
we cannot predict all the risks and uncertainties that could cause
our actual results to differ from those indicated by the
forward-looking statements. If any of these risks or uncertainties
materialize, or if any of the underlying assumptions prove
incorrect, actual results may vary from those indicated by the
forward-looking statements, and such variances may be material. All
subsequent written and verbal forward-looking statements made by or
attributable to us or to persons acting on our behalf are expressly
qualified in their entirety by reference to these risks and
uncertainties. You should not place undue reliance on
forward-looking statements. Each forward-looking statement speaks
only as of the date of the particular statement, and we undertake
no obligation to update or revise any forward-looking statements we
may make, except as may be required by law.
Schedule A - Income Statement
Results of
Operations (unaudited)
|
Three Months
Ended
|
|
September 30,
2018
|
|
June 30,
2018
|
|
September 30,
2017
|
|
(In Thousands, Except
per Unit Amounts)
|
Revenues:
|
|
|
|
|
|
Compression and
related services
|
$
58,869
|
|
$
56,709
|
|
$
51,662
|
Aftermarket
services
|
19,869
|
|
15,094
|
|
9,517
|
Equipment
sales
|
36,518
|
|
28,119
|
|
10,419
|
Total
revenues
|
115,256
|
|
99,922
|
|
71,598
|
Cost of revenues
(excluding depreciation and amortization expense):
|
|
|
|
|
|
Cost of compression
and related services
|
31,074
|
|
30,509
|
|
28,347
|
Cost of aftermarket
services
|
16,165
|
|
12,841
|
|
7,733
|
Cost of equipment
sales
|
33,458
|
|
24,158
|
|
9,424
|
Total cost of
revenues
|
80,697
|
|
67,508
|
|
45,504
|
Depreciation and
amortization
|
17,681
|
|
17,448
|
|
17,361
|
Insurance
recoveries
|
—
|
|
—
|
|
(2,352)
|
Selling, general, and
administrative expense
|
10,592
|
|
10,849
|
|
8,682
|
Interest expense,
net
|
13,847
|
|
13,823
|
|
11,071
|
Series A Preferred
fair value adjustment
|
570
|
|
(586)
|
|
(1,300)
|
Other (income)
expense, net
|
(78)
|
|
(378)
|
|
(319)
|
Income (loss) before
income tax provision
|
(8,053)
|
|
(8,742)
|
|
(7,049)
|
Provision (benefit)
for income taxes
|
(106)
|
|
850
|
|
772
|
Net income
(loss)
|
$
(7,947)
|
|
$
(9,592)
|
|
$
(7,821)
|
|
|
|
|
|
|
Net income per
diluted common unit
|
$
(0.18)
|
|
$
(0.23)
|
|
$
(0.22)
|
Reconciliation of Non-GAAP Financial Measures
The Partnership includes in this release the non-GAAP financial
measures Adjusted EBITDA, distributable cash flow, distribution
coverage ratio, and free cash flow. Adjusted EBITDA is used as a
supplemental financial measure by the Partnership's management
to:
- assess the Partnership's ability to generate available cash
sufficient to make distributions to the Partnership's unitholders
and general partner;
- evaluate the financial performance of its assets without regard
to financing methods, capital structure or historical cost
basis;
- measure operating performance and return on capital as compared
to those of our competitors; and
- determine the Partnership's ability to incur and service debt
and fund capital expenditures.
The Partnership defines Adjusted EBITDA as earnings before
interest, taxes, depreciation, and amortization, and before certain
non-cash charges consisting of impairments, bad debt expense
attributable to bankruptcy of customer, non-cash costs of
compressors sold, equity compensation, fair value adjustments of
our Preferred Units, administrative expenses under the Omnibus
Agreement paid in equity using common units, severance expense,
write-off of unamortized financing costs, and software
implementation expense.
Distributable cash flow is used as a supplemental financial
measure by the Partnership's management, as it provides important
information relating to the relationship between our financial
operating performance and our cash distribution capability.
Additionally, the Partnership uses distributable cash flow in
setting forward expectations and in communications with the board
of directors of our general partner. The Partnership defines
distributable cash flow as Adjusted EBITDA less current income tax
expense, maintenance capital expenditures, interest expense, and
severance expense, plus non-cash interest expense.
The Partnership believes that the distribution coverage ratio
provides important information relating to the relationship between
the Partnership's financial operating performance and its cash
distribution capability. The Partnership defines the distribution
coverage ratio as the ratio of distributable cash flow to the total
quarterly distribution payable, which includes, as applicable,
distributions payable on all outstanding common units, the general
partner interest and the general partner's incentive distribution
rights.
The Partnership defines free cash flow as net cash provided by
operating activities less capital expenditures, net of sales
proceeds. Management primarily uses this metric to assess our
ability to retire debt, evaluate our capacity to further invest and
grow, and measure our performance as compared to our peer group of
companies.
These non-GAAP financial measures should not be considered an
alternative to net income, operating income, cash flows from
operating activities or any other measure of financial performance
presented in accordance with GAAP. These non-GAAP financial
measures may not be comparable to Adjusted EBITDA, distributable
cash flow, free cash flow or other similarly titled measures of
other entities, as other entities may not calculate these non-GAAP
financial measures in the same manner as CSI Compressco. Management
compensates for the limitation of these non-GAAP financial measures
as an analytical tool by reviewing the comparable GAAP measures,
understanding the differences between the measures and
incorporating this knowledge into management's decision-making
process. Furthermore, these non-GAAP measures should not be viewed
as indicative of the actual amount of cash that CSI Compressco has
available for distributions or that the Partnership plans to
distribute for a given period, nor should they be equated to
available cash as defined in the Partnership's partnership
agreement.
Schedule B - Reconciliation of Net Income/(Loss) to Adjusted
EBITDA, Distributable Cash Flow and Distribution Coverage Ratio
(unaudited)
The following table reconciles net income (loss) to Adjusted
EBITDA, distributable cash flow and distribution coverage ratio for
the three month periods ended September 30,
2018, June 30, 2018 and
September 30, 2017:
|
Three Months
Ended
|
|
September 30,
2018
|
|
June 30,
2018
|
|
September 30,
2017
|
|
(In Thousands, Except
Ratios)
|
Net
income/(loss)
|
$
(7,947)
|
|
$
(9,592)
|
|
$
(7,821)
|
Interest expense,
net
|
13,847
|
|
13,823
|
|
11,071
|
Provision (benefit)
for income taxes
|
(106)
|
|
850
|
|
772
|
Depreciation and
amortization
|
17,681
|
|
17,448
|
|
17,361
|
Non-cash cost of
compressors sold
|
1,951
|
|
811
|
|
2,406
|
Equity
compensation
|
367
|
|
496
|
|
261
|
Series A Preferred
fair value adjustments
|
570
|
|
(586)
|
|
(1,300)
|
Un-amortized
financing costs charged to expense
|
—
|
|
—
|
|
—
|
Severance, software
implementation & other costs
|
176
|
|
12
|
|
591
|
Adjusted
EBITDA
|
$
26,539
|
|
$
23,262
|
|
$
23,341
|
|
|
|
|
|
|
Less:
|
|
|
|
|
|
Current income tax
expense
|
$
343
|
|
$
774
|
|
$
545
|
Maintenance capital
expenditures
|
5,194
|
|
5,591
|
|
3,841
|
Interest
expense
|
13,847
|
|
13,823
|
|
11,071
|
Severance & other
costs
|
176
|
|
12
|
|
8
|
Plus:
|
|
|
|
|
|
Non-cash interest
expense
|
1,980
|
|
2,154
|
|
3,029
|
Distributable cash
flow
|
$
8,959
|
|
$
5,216
|
|
$
10,905
|
|
|
|
|
|
|
Cash distribution
attributable to period
|
$
8,383
|
|
$
8,015
|
|
$
6,916
|
|
|
|
|
|
|
Distribution coverage
ratio
|
1.07x
|
|
0.65x
|
|
1.58x
|
|
|
|
|
|
|
|
|
|
|
|
|
Schedule C - Reconciliation of Net Cash Provided by Operating
Activities to Free Cash Flow (unaudited)
The following table reconciles net cash provided by operating
activities to free cash flow for the three month periods ended
September 30, 2018, June 30, 2018 and September 30, 2017:
Results of
Operations (unaudited)
|
Three Months
Ended
|
|
September 30,
2018
|
|
June 30,
2018
|
|
September 30,
2017
|
|
|
(In
Thousands)
|
Cash provided/(used)
by operating activities
|
$
10,789
|
|
$
(3,908)
|
|
$
13,218
|
|
Capital expenditures,
net of sales proceeds
|
(30,902)
|
|
(30,223)
|
|
(2,236)
|
|
Free cash
flow
|
$
(20,113)
|
|
$
(34,131)
|
|
$
10,982
|
|
Schedule D - Reconciliation of Projected Net Income/(Loss) to
Adjusted EBITDA and Distribution Coverage Ratio
(unaudited)
The following table reconciles a range of projected fourth
quarter 2018 net loss to projected fourth quarter 2018 Adjusted
EBITDA and projected fourth quarter 2018 Distribution Coverage
Ratio.
|
Q4 2018
Guidance
|
|
Low
Range
|
|
High
Range
|
|
(In Thousands, Except
Ratios)
|
Net income
(loss)
|
$
(4,520)
|
|
$
(3,470)
|
Interest expense,
net
|
13,000
|
|
13,500
|
Depreciation and
amortization
|
17,500
|
|
18,200
|
Non-cash cost of
compressors sold
|
2,270
|
|
1,920
|
Equity
Compensation
|
150
|
|
350
|
Series A Preferred
fair value adjustments
|
600
|
|
500
|
Adjusted
EBITDA
|
$
29,000
|
|
$
31,000
|
|
|
|
|
Less:
|
|
|
|
Current income tax
expense
|
383
|
|
383
|
Maintenance capital
expenditures
|
4,000
|
|
4,800
|
Interest
Expense
|
13,000
|
|
13,500
|
Plus:
|
|
|
|
Non-cash interest
expense
|
1,250
|
|
1,650
|
Distributable cash
flow
|
$
12,867
|
|
$
13,967
|
|
|
|
|
Cash distribution
attributable to period
|
$
8,833
|
|
$
8,720
|
|
|
|
|
Distribution coverage
ratio
|
1.5x
|
|
1.6x
|
Schedule D assumes common units distributions in Q4 2018 will
continue at the current amount of $0.75 per common unit on an annualized basis.
View original content to download
multimedia:http://www.prnewswire.com/news-releases/csi-compressco-lp-announces-third-quarter-2018-results-and-provides-fourth-quarter-guidance-300745377.html
SOURCE CSI Compressco LP